People often claim you don’t make money buying vol.
And exclusively buying options is a sure way to light your money on fire
But if you know how to manage them effectively, there’s absolutely money to be made
A seasoned trader’s perspective☟
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➠ UNLEASHING THE POWER OF OPTIONALITY
σ Most options expire worthless, but does that mean buying them is a bad idea?
With 20+ years of options trading experience, I believe that understanding option premium behavior can help you harness the power of optionality for immense benefits.
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➠ KEYS TO SUCCESSFUL OPTIONS TRADING
σ With all the recent 0DTE craze, these shorted dated options being purchased have frequently amplified intraday choppiness and sticky price action.
Making buying options seem unappealing.
But the key to success lies in understanding how option premiums evolve over time.
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➠ THE ART OF TIMING
σ First, we must accept that when you buy a #Calloption & the underlying plummets, kiss that premium goodbye!
Same goes for a #Put bought on NDX after a 5% drawdown & VIX spike.
You won’t see that premium again.
Timing is everything!
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➠ SNIPER-LIKE APPROACH
σ Holding options till maturity? Good luck!
You are fighting an uphill battle, where you must nail the market direction & fight time decay eating your gains
So you could be right but still lose money!
And being right but losing money is easily the worst feeling in trading options.
So what’s the blueprint to avoiding this?
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σ Buying options profitably requires a sniper-like approach.
Get in & get out quickly.
Options offer leverage, allowing you to spend a small premium for potentially massive returns if you catch a big move.
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➠ GENERATING ALPHA
σ When done correctly, buying #options can generate alpha through superior risk-adjusted returns.
Options are also used for hedging, as money managers often use put options to protect their portfolios from macro shocks.
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➠ EVOLVING WITH THE MARKET
σ Success with options requires evolving with the market.
As the average duration of volatility spikes shrinks, the window of opportunity to monetize hedges narrows.
Creating challenging dynamics for long volatility funds & reduces demand for options.
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➠ SEIZING OPPORTUNITIES
σ However, this reduction in demand has also led to lower implied volatility prices.
Presenting opportunities for those willing to spend the premium.
Having options can be a valuable addition to your investment portfolio in today’s increasingly uncertain world.
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➠ LEVERAGE YOUR CAPITAL WITH OPTIONS
σ In conclusion, buying options isn’t a waste of money IF you know how to leverage them effectively.
Understand premium behavior, act quickly, and evolve with the market to make the most of your options trades.
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Have questions for me about your option strategies?
Let me hear them in the replies!
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➠ Has this inspired you to take your options education more seriously?
If so, we’ve got the perfect options trading courses for you in partnership with some of our favorite people in finance!
σ For true beginners, click here to head to Real Vision Academy for the perfect options primer – in laymen’s terms!
σ Are you ready for a bit more? Click here for SpotGamma’s 3-part series, The Hedge, is the place for you.
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Thank you for making it this far!
Cheers!
Imran Lakha
Options Insight
